- The US dollar found itself rather soft against the Japanese yen during trading on Tuesday, as we have broken below the ¥146 level quite drastically.
- I think ultimately, we are looking at this as a scenario where we are just simply going to move on the idea of risk appetite and where that is going.
- The market is likely to continue to pay close attention to the ¥145 level, which is where we crashed into and started to find a little bit of buying pressure.
Technical Analysis
The technical analysis for this pair is starting to flatten out a bit, as we had previously been so horribly negative. With this being the case, the market is likely to continue to see buyers underneath, especially if we get anywhere near the ¥142 level, an area that has been important a couple of times. If we were to break down below that level it would be a bit surprising to me, but it of course is possible.
On the upside, if we can break back above the ¥146 level, then I think we have the possibility of a move back to the 200 Day EMA, essentially where we had peaked during the trading session on Monday.
If we were to break above that 200 Day EMA and by extension, the ¥148 level, the market would more likely than not really start to take off, perhaps targeting the crucial ¥150 level. Anything above there opens of a longer-term “buy-and-hold” type of scenario. While I don’t necessarily expect that to happen easily, it is something that’s very realistic if we get a sudden run to the US dollar. The interest rate differential continues to favor the US dollar against the Japanese yen, so I don’t like shorting this pair, unless it is for a very short term move. I think we are in the midst of trying to find the longer term bottom, which of course is very noisy.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
